Trade Groups Challenging the Payment Provisions of the CFPB’s 2017 Final Rule on Payday Loans/Auto Titles/High-Rate Installment Loans (2017 Rule) filed their opening brief with the fifth circuit. The Business Groups appealed to the Fifth Circuit from the final judgment of the District Court granting the CFPB’s motion for summary judgment and staying the payment provision compliance date until 286 days after August 31, 2021 (which would have been until June 13, 2022).
The fifth circuit subsequently entered an order suspending the date of compliance with the payment arrangements up to 286 days after resolution of trade groups appeal.
The main argument of the trade groups on appeal continues to be that the 2017 rule was void ab-initio because the CFPA’s unconstitutional opt-out restriction means the Bureau lacked the authority to enact the 2017 rule. They also argue that:
- Ratification cannot remedy the constitutional defect because the defect relates to the unlawful exercise of governmental authority by the Office and its Director, not the power of an agent to make decisions on behalf of the Office or its Director. The only proper remedy for invalid regulation is valid regulation.
- The 2017 rule continues to be invalid as there are two ongoing separation of powers violations. One violation stems from the Office’s funding mechanism that does not require congressional appropriations. The other violation stems from the Bureau’s unconstitutional exercise of law-making powers granted exclusively to Congress. If Congress gives authority to agencies, it must state an intelligible principle. There is no intelligible principle in the delegation of appropriations to the Director or in the “vague and broad authority of the Office’s UDAAP invoked to justify the  To reign.”
- While ratification can sometimes remedy deficiencies in rulemaking, the Bureau’s ratification of payment provisions violates both the CFPA and the APA because it was illegal, arbitrary, and capricious. Ratification violates the APA and CFPA because it was a regulation that required notice and comment under the APA and did not satisfy the CFPA’s requirement of a cost-benefit analysis. benefits. The ratification is arbitrary and capricious because the Bureau’s 2020 rule revoking the repayment capacity provisions of the 2017 rule eliminated justifications for the payment provisions by rejecting the Bureau’s earlier interpretation of the UDAAP. Ratification was also inconsistent with the cost-benefit analysis required by the CFPA, as the cost-benefit analysis of the Bureau’s payment provisions in 2017 relied on the provision-enhancing effects on repayment capacity that the regulation of 2020 has been completely removed.
- Regardless of the illegal ratification, the payment arrangements must be dismissed as illegal, arbitrary and capricious. The payment arrangements are illegal because they are outside the Bureau’s UDAAP authority. The Bureau based the payment provisions on unreasonable and overbroad interpretations of its UDAAP authority. The payment arrangements are arbitrary and capricious because the Bureau did not take into account the offsetting effects of the payment arrangements, such as the increased likelihood that a loan will go into collection sooner than it would have ( where applicable) and the Bureau acted on the basis of outdated data. At a minimum, payment arrangements are arbitrary and capricious due to their coverage of separate installments of multi-payment loans and debit and prepaid card payments. These payments and modes of payment-transfer do not cause the damages referred to in the provisions.